Lidl ‘rewards’ farmers with cost-plus egg contracts

Discount supermarket Lidl is introducing new five-year contracts, linked to the cost of production, as a way of rewarding farmers and securing its supply base.

The move, which is targeted at both new and existing egg producers, follows a period during which the UK egg sector has contracted significantly as a result of both inadequate producer margins and significant bird losses from avian influenza.

See also: Egg shortages highlight need for fairer prices, say farmers

Martin Kottbauer, chief trading officer at Lidl GB, said: “The last year has been particularly challenging for the British egg industry, and it’s had an impact on everyone.

“As an industry we need to be doing more to ensure the long-term sustainability of the British egg sector, which is why we have taken steps to offer incentives and security for farmers to expand into egg production.”

To help boost egg production, farmers are being offered “an additional investment on top of market rates, supported by long-term contracts as part of a guaranteed payback deal”.

Expansion 

New entrants to the sector Bob and Kay Adam have recently expanded their beef farming operation in Scotland to include a new 32,000-bird free-range unit, supplying eggs to packer Farmlay Eggs, which supplies Lidl.

Farmlay owner Robert Chapman said: “The security that Lidl has given us with long-term contracts and a cost-of-production model ensures a good return, back to the primary producer.

“This security has enabled Farmlay to expand its own production base and also to encourage existing and new producers, like Bob and Kay, to invest.”

Lidl says it is investing some £40m into its egg supply chain. It has also criticised other retailers, such as Sainsbury’s, which has turned to imported barn eggs from Italy over the past year to help keep its shelves stocked.

A Bfrepa spokesperson said: “Bfrepa has been asking for producers to be offered contracts based on a cost-of-production model to ensure that farm businesses are not left exposed to the extreme market volatility seen over the past 18 months. 

“It’s extremely encouraging to see Lidl offering this support to its producer base, and we would encourage other retailers who don’t currently offer farmers these contracts to consider doing so. 

“The free-range and organic egg sectors have been stuck in this boom-and-bust cycle for too long. We need to find ways to ensure primary producers can guarantee a supply of British eggs to avoid the supply shortages and associated import requirements.”